ACC FINALLLLLLL!!!!!

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Southern New Hampshire University *

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307

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Accounting

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Feb 20, 2024

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ACC 307 Final Project Part II: Ratio Analysis Report Atlanta Deuel Southern New Hampshire University

The primary goal of ratio analysis is to determine the profitability of a company. Ratio is described as “…relationships between and among items on financial statements. They are useful indicators of financial position and performance, serving as metrics to evaluate a company’s results over time and against its competitor” (Wahlen, Jones, & Pagaach, 2017). In this analysis report we will use historical ratios from 2015 – 2017 to draw a comparison from one year to another. This report will also include the industry standard to identify comparable trends. This report will focus on the quick ratio, gross margin, net margin, and return on equity ratios. Profitability is the ability of a company to use its resources to generate revenues that exceed its expenses. Liquidity is defined as the ability of a company to meet its financial obligations as they come due. Using the financial analysis tab in our workbook I calculated the quick ratio, gross margin. Net margin and return on equity for Peyton Approved. Quick ratio analyzes a company’s liquidity and ability to pay on short-term debts. “The formula for quick ratio is quick asset (cash, cash equivalents) divided by current liability” (Wahlen, Jones, & Pagach, 2017). For Peyton Approved cash totaled $64, 713.72, plus accounts receivable which totals $30,401.00. Add those together and it equals $95,114.72 in quick assets. Next, divide the $95,114.72 by $51,893.75 (total current liabilities) and you get a quick ratio of 1.84. The quick ratio of 1.84 indicates near- term financial security or the ability to cover short-term debt obligations. The gross margin measures company profitability by dividing gross profit from total revenue. These figures are $217,715.00 gross profit divided by $370,875.00 total revenue. This resulted in aa gross margin ratio of 0.59.

Comparison Ratios: 2017 2016 2015 Industry Standard Quick Ratio 1.84 2.2 2.8 1.75 Gross Margin 0.59 0.55 0.7 0.7 Net Margin 0.23 0.22 0.32 0.24 Return on Equity 0.89 0.9 0.78 0.8 In your second body paragraph, complete the comparison portion of your report: Evaluate the financials of the company by comparing ratios to both historical and industry- average ratios. Clearly identify all unexpected or aberrant figures. Paragraph Three: Conclusions (Delete this heading in your final paper) In your third body paragraph, draw informed conclusions based on your computations and comparisons in the previous paragraphs. Be sure to justify your claims with specific evidence and examples.

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References Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting: Reporting and analysis (2nd ed.). Boston, MA: Cengage Learning.

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